Though negotiable instruments are ordinarily classed as simple contracts and undoubtedly partake to some extent of the nature of simple contracts, yet they are also formal contracts. It is necessary in order to constitute a negotiable instrument that a writing shall contain an unconditional order or promise. It must be payable in money, must contain no independent order or agreement, must be certain as to parties, as to time of payment, and as to the amount payable, and, finally, it must be payable to order or to bearer.31 At common law it was necessary that it should be unsealed, but by the Uniform Negotiable Instruments Law, which has been enacted in most of the United States, negotiability is not destroyed by the addition of a seal.32 The points of resemblance in a negotiable instrument to a formal contract, as distinguished from a simple contract, may be thus enumerated.33
30A contrary argument is ably presented by Professor Edward H.
Decker, in the Illinois Law Bulletin for February, 1918, p. 166.
(1) None but parties to a bill can be parties to an action thereon, whereas in simple contracts the law of undisclosed principal is applicable.33a even though for accommodation, are not within the scope of the Statute of Frauds relating to guarantees.36
(2) A bill is treated as a speciality in pleading, that is, the instrument itself is set out and sued upon without statement of the consideration for the instrument or the circumstances out of which it arose.
(3) A negotiable instrument merges an antecedent obligation for which it is given. It is true that the antecedent obligation will not infrequently be revived if the negotiable instrument is dishonored at maturity, but until maturity the old obligation is merged and in many cases the merger is final and complete, the instrument being taken in full and unconditional satisfaction of the antecedent obligation.34
(4) The law of mutual assent as applied in simple contracts is to a considerable extent inapplicable to negotiable instruments, since a negotiable instrument takes effect upon delivery and may be binding though the maker dies before the payee becomes aware of the existence of the instrument.35
(5) The secondary obligations on negotiable instruments,
31 See Uniform Negotiable Instruments law, Sec. 1-6, infra, Sec.Sec. 1136-1138.
32 Negotiable Instruments law, Sec. 6, infra, Sec. 1138.
33 The enumeration is in the main adopted from 2 Ames Cos. Bills and Notes, 873.
33a Infra, Sec. 298.
34Infra, Sec.Sec. 1922-1924.
35 Dean v. Carruth, 108 Mass. 242; Worth v. Case, 42 N. Y. 362.
(6) A negotiable instrument is treated not simply as evidence of a contract, but the instrument is the obligation itself. Thus a negotiable instrument may be the subject of conversion and the measure of damages is the face of the instrument if collectible.37 It may be assigned by delivery like a chattel rather than a chose in action.38 The law of taxation and of administration also, to some extent supports the view that the document itself is the obligation. Negotiable instruments, moreover, are generally held within the section of the Statute of Frauds covering sales of goods and chattels.39 Finally, the cancellation of a bill or note is appropriately made by the destruction of the document. If the holder of a negotiable instrument intentionally destroys it, the obligation of all parties to the instrument ceases; 40 whereas if any ordinary written contract were intentionally destroyed by the promisee, though he might have some difficulty in proving his case in court, his right would not be lost.
On the other hand, a negotiable instrument resembles a simple contract in its requirement of consideration. It is conceived that the doctrine is most accurately stated by saying that lack of value or consideration as between the immediate parties is a personal defence.41 The identification of negotiable instruments with simple contracts, however, so far as consideration is concerned, has been often treated as so complete except for the purpose of pleading, as to lead courts to treat consideration as a necessary element for the creation of such an instrument.41
36 Juris v. Wilson, 46 Conn. SO, 33 Am. Rep. 18; Nelson v First Bank, 48 111. 38, 95 Am. Dec. 510; Laflin v. Sinshcimer, 48 Md. 411, 30 Am. Rep. 472; O'Donnell v. Smith, 2 E. B. Smith, 124; Casey v. Brabason, 10 Abb. Pr. 368; Strohecker v. Cohen, 1 Speers, 349; Fisher v. Beclcwith, 19 Vt. 31, 46 Am. Dec. 174; and see infra, Sec. 498.
37 2 Ames' Cas. Bills and Notes, 693.
38 See infra, Sec. 439.
39See infra, Sec. 521.
40Neg. Inst. Law, See. 119 (3), infra, Sec.1189.
41 This is the form of statement in Neg. Inst. Law, Sec. 28. See infra, Sec. 1146.
42See Neg. Inst. Law, See. 24-28, infra, Sec. 1146; Daniel, Neg. Inst. Sec.Sec. 160 et seq.